Reform of state plantation firms moving at slow pace
JAKARTA (JP): The reform of state-owned plantation companies (PTP) which began in May, 1994, with the realignment of the 26 PTPs into nine groups, has been running much slower than planned.
Several analysts have expressed their fear that the consolidation program might follow the fate of similar attempts in the 1980s to improve the efficiency and productivity of the state plantation sector, which at present covers an estimated 1.5 million hectares with assets totaling US$3 billion.
Agriculture Minister Sjarifudin Baharsjah admitted recently that the grouping, which he called a historical milestone in the overall consolidation of the PTPs, has hit some snags due to grouping difficulties in Central and East Java.
"But the problems were solved after the grouping of the PTPs in the two provinces was changed, separating sugar PTPs from the ones that manage such crops as clove, cacao, tea and coffee," Sjarifudin added.
He said he had submitted the final report of the consolidation team to the finance minister for approval.
"I can assure you that the directors of the PTPs are now comfortable with their respective groupings and the merger process can now be accelerated," he told The Jakarta Post.
Yet analysts who have closely monitored the restructuring process contend that the grouping might be the only means of overall, long-term reform.
"The grouping should have been followed by a merger process last April. But how can you talk about a merger when the PTPs within a group have not even consolidated their financial reports," the analyst of an agronomy research center commented.
Most of the officials and analysts interviewed for this article insisted on anonymity.
"This time I think the government should be really serious about reforming the PTPs. Without mergers, I don't think they will be able to compete with the big private companies which have steadily expanded their tree crops," business analyst Christianto Wibisono noted.
According to the original schedule, the merger process was to take effect with last April's Presidential decree.
The agriculture and finance ministries set five criteria in 1994 for the consolidation of PTPs: The realignment of their missions, optimum economies of scale, resilience to market fluctuations, integration of upstream and downstream units and financial soundness.
Under the first phase of the reform the 26 PTPs were geographically realigned into nine groups:: Aceh, North Sumatra I, II and III, Lampung, West Java, Central Java, East Java and Sulawesi & Irian Jaya.
The restructuring was launched to address a number of PTP weaknesses identified through a series of studies made in the 1980s and early 1990s by private and government institutions, including the World Bank, the Indonesian Planters' Association of Plantation Research and Development (AP3I), Agrobusiness Research and Development Center.
Bureaucracy
The studies found that the PTPs, shackled by bureaucratic command, lack a commercial mentality and the motivation to improve productivity, efficiency and performance.
If the weaknesses are not removed, they concluded, the PTPs will not likely survive commercially in an increasingly competitive market.
The studies cited several main reasons behind the weaknesses: Too much government intervention in PTP managements, lack of corporate goals and accountability, conflicting responsibilities for carrying out commercial and social missions, widely-spread areas of plantations and joint marketing offices.
However, the agricultural officials and PTP executives that have been benefiting greatly from the current structure of PTP management have been lobbying hard to have the reform initiative canceled or reduced to a meaningless exercise.
"They are afraid that if the reform is carried out they will no longer be able to use PTPs as their cash cow," an analyst said.
Hastjarjo Soemardjan, a senior researcher at AP3I, reckoned that as long as the merger process is based entirely on business sense there should not be any major obstacles to accomplishing the process.
"After all, the owners of the PTPs are the same entity (government). I think the owner (government) should be firm regarding the merger despite the protests from some quarters," Hastjarjo said.
He argued, however, that the merger process should be accompanied by the streamlining of the PTPs mission.
"The PTPs should not be overloaded with numerous missions." he pointed out.
Aberson Marle Haloho, a member of the House Budgetary Commission, saw heavy government intervention as the main barrier to improving PTP efficiency and productivity.
Since the PTPs are owned by the government, all parties-- from the sub-district and provincial administrations up to the ministries in Jakarta-- assume they have the right to meddle in PTP operations, Aberson noted.
"Now since PTPs no longer enjoy special treatment and facilities from the government and they have instead to operate fully as private commercial entities, they should be unshackled from official bureaucratic red tape," Aberson said. (hdj/pwn/vin)